Trader Talk

US Reputation Declining Overseas

The reputation of the U.S. is declining overseas. During my recent trip to Turkey, I got smacked in the face by a rotating cast of international fund managers, Turkish businessmen...even tour guide operators...all furious that the U.S. appeared to be dropping the ball and shirking its responsibility to make sure the U.S. Treasury bond was the gold standard (read: "risk-free standard") for the world.

Bodrum, on the southwestern coast of Turkey, is the Hamptons of the country. The new Turkish elite, who have reaped the rewards of GDP growth over 9 percent (on a par with China), descend on this small town in the summer and turn a fishing village into a global village. Growth has cooled somewhat since earlier in the year, but the Turks have good reason to feel expansive: Turkey has not had to bail out any of its banks. Credit is expanding. Growth in 2011 may still be the fastest in Europe.

Turkey has also become a magnet for foreign investors. The ruling party has opened up the economy and as a result recently won re-election with nearly half the total vote.

But it wasn't Turkey that was on the minds of foreign investors in Bodrum: it was the U.S. I met with a Lebanese fund manager...a Dubai investor specializing in investing in metal ventures in Africa...a prominent Kuwaiti doctor...and the head of the hotel I stayed at...all of whom had a variant on the same question: "What the hell is going on in the United States?"

And they weren't just worried about the debt limit. "Do you know what will happen if there is a credit downgrade of the U.S.?," one international fund manager said to me while he was sipping white wine at the bar on the beach. "It will raise the cost of borrowing for everyone in the world...EVERYONE!"

I tried to point out that it was high time the U.S. had a serious discussion about reducing debt, and this was the start of that discussion.

But no one was impressed with that argument. "Addressing an overspending problem by blowing up the credit rating of the U.S. is insane!," one manager said.

The point of this story: the reputation of the U.S. is taking a serious hit.


What's up with stocks? Stocks are weak again today...but today might be a little less about the debt crisis, and more about weaker growth and's the problem: companies are continuing to beat on earnings and revenues, but there is much less guidance than far about half of the S&P 500have reported (232 companies, to be exact). According to Standard and Poor's, only 11 percent of those companies have provided any guidance, far less than usual, indicating the uncertain economic environment.

Bottom line on today's weakness: this smells a lot more like concern over slower global growth...and the poster child is not Juniper , it's Emerson Electric .

This is a big, diversified global company. Their comment today: "...we have seen a definite weakening of general business activity in June and July." They said that U.S. and European economies "have clearly slowed and entered a softpatch, and it remains unclear if they will improve much in the second half of the calendar year."

EMR down 7 percent today to a new low for 2011.

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